Economic Update

Published 29 Mar 2018

An airport infrastructure expansion set to come into operation this year will help Kuwait keep pace with strong growth in passenger movements, as local carriers continue with network expansions and fleet upgrades.

In late February Ebrahim Abdullah Al Khuzam, CEO of national carrier Kuwait Airways, announced that the new support terminal at Kuwait International Airport (KIA) would open in June, doubling the airport’s capacity to 10m passengers.

Originally expected to enter into operations last year, the KD52.9m ($175m) extension has been built to ease traffic congestion at KIA until the larger Terminal 2 becomes operational in 2022. The support terminal will span 55,000 sq metres, and accommodate arriving and departing flights for Kuwait Airlines.

Passenger throughput at KIA exceeds capacity

Although the new support terminal will significantly ease the flow of passengers through KIA, it will not fully bridge the existing capacity shortfall.

Passenger traffic at KIA increased by 17% in 2017 to 13.7m, according to the latest data from the Directorate General of Civil Aviation (DGCA), more than double KIA’s rated capacity of 5m, while the number of inbound and outbound flights increased from 98,000 to 111,000.   

However, when the KD1.3bn ($4.3bn) Terminal 2 project comes on-line, it will bring passenger-handling capacity to 25m, which will give the airport a significant margin to grow, with throughput forecast to reach 23m by 2027.

Kuwait carriers expand fleets and services

In the meantime, the airport extension will play an important role in Kuwait Airways’ five-year transformation strategy, which entails a complete overhaul of operations to return the airline to profits and increase its regional competitiveness.

As part of these plans, the airline, which currently services 39 international destinations, significantly expanded its summer 2017 schedule, increasing flights to India, East Asia, Europe and the Gulf region.

In early 2018 the carrier also increased the number of flights on its routes to Bangkok, Paris and Munich, and added Tbilisi in Georgia, and Turkey’s Black Sea city of Trabzon to its list of destinations.

To service the extra routes the carrier is expanding its fleet, purchasing 10 Boeing 777-300s between December 2016 and August 2017. The new aircraft, worth a total of $3.3bn, lowered the average age of its fleet from 8.7 years to 5.8.

Other airlines are similarly looking to expand their networks this year. Low-cost carrier Jazeera Airways announced in mid-January that it was expanding its operations in India, adding Kochi to its existing roster of Hyderabad and Ahmedabad, with plans to include Andhra Pradesh later this year.

This increase in services may help Jazeera boost earnings and profits, which have dipped in recent years. In 2017 net profits fell by 24% to KD8.2m ($27.1m), despite a 6.7-percentage-point increase in its load factor to 73.9% of capacity, according to data issued in early February.

In addition, after restarting operations in July last year, Kuwait’s other carrier, Wataniya Airways, took delivery of four new Airbus A320s to serve new routes like Nepal and Qatar, which was launched in November last year. Following this, in mid-November Wataniya signed a $2.7bn agreement for 25 Airbus A320neos, with the first planes due to be delivered by late 2021 or 2022. In total, the airline aims to have 50-60 aircraft in operation by 2025 to achieve its network expansion goals.

Significant gains in airborne logistics

In tandem with increased passenger movements, the transport sector also witnessed strong growth in air freight activity last year, according to Kuwait-headquartered logistics company Agility.

In the fourth quarter the company reported a 9.7% year-on-year increase in air cargo volume, and an overall increase of 25% in air and maritime freight revenues. Net profits for the year were up 16% at KD68.5m ($226.5m).

Total cargo throughput at KIA last year was 241,600 tonnes, well up on the 195,000 tonnes recorded in 2016, according to the DGCA. Outbound freight rose from 34,000 to 56,300 tonnes, while inbound air shipments jumped from 161,400 to 185,300 tonnes.